Don Cayo: Vancouver is biggest winner when forests, farms and mines do well

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A lot of city slickers underestimate the value of resources to the B.C. economy, but a new think-tank makes the case that it is Metro Vancouver that benefits most when traditional hinterland industries prosper and grow.

“An initial boost to natural resources in B.C. spreads to other industries through demand for inputs or more spending induced by higher incomes,” writes Philip Cross, formerly StatsCan’s chief economic analyst, in a paper released today by Resource Works, a newly minted, Vancouver-based think-tank that intends to specialize in resource-related issues.

“The income and jobs this generates enriches all of B.C., especially the Lower Mainland,” Cross writes. “It is the cities that provide the wide range of financial, business and even transportation services used by the resource sector. It is also in the cities where the higher incomes in the resource sector and its spinoffs are spent on a wide range of retail and personal services.”

Cross bases his conclusions on sophisticated forecasting techniques developed by StatsCan — a combination of labour market analysis and a detailed analysis of tax records that document purchases by resource firms from suppliers.

This not only provided “a precise accounting of all the inter-relationships among industries needed to produce all goods and services in Canada,” but also allowed him to look at how the benefits are shared among regions and provinces.

Then he calculated where the benefits would go if the output of B.C. resource industries increased by a uniform 10 per cent.

The contribution of these industries — agriculture, forestry, fishing, hunting and trapping, mining, oil and natural gas, pipelines, utilities, and manufacturers of wood, pulp and paper, and primary metals — was $21.371 billion, or 11.2 per cent of GDP, in 2010. So a 10-per-cent increase would add $2.137 billion.

Then, Cross argues, a substantial multiplier would kick in, thanks to the boost in consumer spending and the tendency of resource companies to outsource work, especially services, to other companies. The total impact would be $4.5 billion in Canada, $3.8 billion of it in B.C., as well as a $909-million boost in imports.

Measured another way, the result would be 37,177 new jobs in Canada, 29,561 of them in B.C.

Cross has worked extensively with resource statistics for years, but he told a Vancouver Sun editorial board on Wednesday that he was still surprised, not by how much money the sector generates but by how much remains in B.C.

“When you think about it, it makes sense,” he said. “If a resource company needs an opinion on B.C. law, they’re not going to look for it in Ontario or Quebec.”

And it is not just lawyers’ time that resource companies buy.

“The industry that benefits most is finance, insurance and real estate, with a gain of $456 million (in B.C.),” he wrote in the study.

“Transportation (excluding the increase in pipeline output) gets a boost of $185 million, reflecting how the additional output from farms, forests and mines often has to be carried long distances to markets, either elsewhere in Canada or to export hubs.

“Professional, scientific and technical services see a $98 million expansion, as the increase in economic activity spurs more demand for everything from lawyers, architects and engineers to computer designers.

“Retailers also feel a significant boost in spending from the additional jobs and incomes for all the workers in the above categories.”

The impact on jobs in different regions of the province would vary from industry to industry, but gains would occur in every corner of the province.

However — no surprise given the kind of work he expects to see created — “the most striking result is that the Lower Mainland receives 55.5 per cent of all the resource-based jobs created in B.C.

“Of the 29,564 jobs added … 16,413 are located in the Lower Mainland, which reflects the dominance of this region in providing services. Of the 12,778 additional jobs in services, the Lower Mainland garners 8,563, or 67 per cent.”

The release of the paper has been timed to the public launch of Resource Works. Its executive director, Stewart Muir, a former deputy managing editor at The Vancouver Sun, says the organization was initiated by the B.C. Business Council, but has gone far beyond those roots.

Its 16-member advisory council, headed by former president and CEO of Geoscience BC Lyn Anglin is geographically, politically and ethnically diverse. It includes representatives from academia, business, environmental groups, First Nations, labour and more.

Muir said the focus will not be advocacy, but rather research and education — to ensure that British Columbians, no matter what their views, have facts to draw on.

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Don Cayo: Vancouver is biggest winner when forests, farms and mines do well

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